Electric Headache

The rise of EVs is bad news for Canada’s battered oil industry

There are only a few on the road compared to gas guzzlers, but recent predictions by reliable sources see battery powered vehicles becoming the rage much sooner than had been expected.

Since these sedans, SUVs, and possibly pickup trucks will be powered by electricity instead of gasoline what will that mean for the regions in Canada that produce oil from which gasoline is made? Less demand for oil means prices stay flat or go down, investment dries up, employment sags, provincial treasuries accrue fewer taxes and royalties.

New technology that people can afford and is useful to them can become common place in a relatively short time. The iPhone is so ubiquitous now we can hardly remember what life was like before we spent most of our time looking at little screens.

Will we be able to adjust to a surge in electric vehicle sales quickly enough?

In Norway, where all electricity is produced by hydro and the winters require cars with strong, reliable batteries, electric vehicles already account for almost one third of new car sales

On a Sunday, July 9 Tesla showed off its first battery-powered car priced for middle income buyers rather than the super wealthy. Tesla already has 370,000 pending orders and is planning to produce 20,000 cars a month by December.

The Tuesday before, Volvo announced that starting in 2019, every new model the Swedish automaker releases will run at least in part on electric power.

Volkswagen plans to introduce 30 electric plug-in models and hopes to sell one million of them by 2025. Volkswagen will also be producing electric vehicles in China where sales are growing at a much faster rate than in Europe or the U.S.

Bloomberg, a business and financial news network with a heady reputation, is incredibly bullish on the future of electric vehicles. In a recent report, it concluded that EVs will make up 54 per cent of new car sales by the year 2040.

“Tumbling battery prices mean that EVs will have lower lifetime costs, and will be cheaper to buy, than internal combustion engine (ICE) cars in most countries by 2025-29,” the report reported.

That’s only eight years from now. Is Big Oil ready for this? Or do they have their blinders on? And what are the federal and provincial governments preparing to do in the face of declining tax and royalty revenues?

Exxon Mobil expects plug-in sales to grow slowly and have little impact on global consumption of oil. But an executive at Royal Dutch Shell is predicting demand for oil could peak in as little as five years.

Gasoline and diesel will still be needed for long-haul trucking, air planes, rail, and shipping. But since transportation accounts for 24 per cent of carbon emissions in Canada (second only to the oil and gas sector), significantly increasing the number of EVs here and in other parts of the world will reduce both carbon emissions and the demand for oil by refineries that produce gasoline.

Lower demand means the price of a barrel of oil will stay flat, which will hurt oilsands producers because it costs them more to recover a barrel of oil than other producers.

And then there’s the question of pipelines. Do we really need so many new ones if demand for oil is going to take a dive?

Of course, at this point the growth of the electric car market, how fast it will be, and what impact it will have on our consumption of fossil fuels is all speculation. No one knows for sure how all this will turn out. But it’s a trend that’s can’t be easily discounted.

Perhaps one day in the not-too-distant future, gas guzzlers will be viewed as simply distasteful. Just as many non-smokers today look down on those who still puff away.

It’s a cultural shift that not many would have predicted 25 years ago. But some things have a way of catching on with people.

And electric cars may be next. ❧

Gillian Steward is a Calgary writer and former managing editor of the Calgary Herald. This column originally appeared in the Toronto Star.